Investors are rethinking their strategies for Japanese government bonds (JGBs) after the Bank of Japan’s pivot to interest-rate hikes in the past year triggered the biggest losses among global debt markets.
Key to their shift is the outlook for bond yields in the next 12 months, with some market participants predicting that benchmark 10-year borrowing costs won’t climb as sharply as the fiscal year that ended Monday, when rates more than doubled. In the latest potentially bearish news for Japan’s debt market, the central bank announced Monday that it would reduce its purchases of superlong bonds due in 10 to 25 years.
Japanese notes lost 5.2% over the past year when fluctuations in exchange rates aren’t considered, the worst performance among 44 global markets. That’s the sixth straight year of losses for Japan’s sovereign debt, and the biggest since 1990, as the BOJ raises rates when other central banks are cutting them.
With your current subscription plan you can comment on stories. However, before writing your first comment, please create a display name in the Profile section of your subscriber account page.